Renewables getting cheaper for Germans – for first time

For the first time ever, German consumers are about to see a drop in the surcharge they pay for renewable energy.

Germany’s green energy policies include long-term contracts that require feeding renewables like wind and solar into the grid while guaranteeing them above-market rates. The goal is to build out the country’s renewable generation capacity, but the costs of the scheme are passed on to consumers through a surcharge on their electricity bills. It was introduced in 2000, and has risen every year since — including a fivefold jump since 2009 — and currently stands at 6.24 euro cents (7.99 U.S. cents) per kilowatt-hour.

But Germany’s four major grid operators recently released a joint statement saying that surcharge would fall to 6.17 euro cents (7.8 U.S. cents) in 2015, according to Renewable Energy World. The surcharge is expected to drop again in 2016 to 6.05 euro cents, then tick back up slightly to 6.2 euro cents in 2017.

As of now, the average German home pays around €220 ($281.53) a year to finance the country’s clean energy through the surcharge. That’s left the country’s household power costs the second-highest in the European Union.

“[The reduced price] shows that we have successfully stopped the cost dynamic of the past years,” said Germany’s Economy Minister Sigmar Gabriel in a statement e-mailed by his ministry. “This will help stabilize power prices for consumers.” Federations representing large swaths of German industry insist, however, that much more needs to be done to bring the costs down, and the surcharge has been a political thorn in the side of Chancellor Angela Merkel’s government for years.

However, support for the country’s green energy policies remains high among the German populace, arguably because the citizens themselves locally own half the country’s renewable capacity — meaning they benefit from the returns on investment even as they pay the surcharge.

Interestingly, Germany also enjoys unusually low prices in its electricity wholesale market — where the big producers and distributors buy and sell power before turning around and repackaging it with the surcharge for everyday customers. Many of the long-term contracts that underlie Germany’s green energy push are set to expire in the next few years, which should bring residential costs more in line with prices in the wholesale market.

And while Germany faces high costs, it also enjoys one of the most reliable grids in the advanced world. Its power went offline an average of only 16 minutes per customer in 2008, beating out almost every other developed western country, and leaving the U.S. — which lost an average of 244 minutes per customer — far behind in the dust. That’s not what’s generally expected from big efforts to expand renewable generation, which observers assume will increase grid unreliability because of the intermittency of wind and solar. But Germany has successfully put together a national policy to coordinate different forms of power on its grid at different times, smoothing out transitions and allowing the grid to make do with less of the baseload power fossil fuels have traditionally provided. The costs of this coordination often get passed on to consumers again, but it results in reliable power consumption.

In the short term, the internal dynamics of Germany’s power grid and its policies have perversely led to a modest increase in coal power generation, thanks to a drop in natural gas generation and the country’s decision to phase out its nuclear power after the Fukushima disaster. But Germany remains committed to getting 80 per cent of its power from renewable sources by 2050. And it successfully took one third of its power green in the first half of 2014.